The Finance Act 2017: Do We Live In Uber-Exciting Times?
Or is it all a bit of a yawn?
You might have missed it in all the excitement of the election, but the Finance Act 2017 was published at the end of April. It was a bit of a rushed affair ...
The Finance Act 2017 was cut down during the wash-up period in Parliament, but expect Part 2!
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The original finance bill was 762 pages, but in order to get it through Parliament before the election recess, it was cut to just 148 pages. Don't worry though, the other 614 pages (and more) will undoubtedly be coming back once the election is over in a second Finance Act!
"The question is will they have a blue or a red theme?"
And what of the stuff that did get included in the 2017 Finance Act? Well, it was all the simple and mainly uncontroversial stuff like changes to tax rates and allowances. Anything that needed debate, or was not instantly liked by the opposition parties, was dropped for the sake of expediency, which brings about some unresolved issues.
The issues mainly relate to tax measures that were announced in the Spring Budget as having an April 2017 start date, but might not be legislated for at all, or get amended in some way in the next Finance Act.
Of course, there is always the uncertainty of which party will have a majority after the election as well. Might we be discussing a Labour or a Conservative set of ideas? We'll find out next month. However, if we work on the assumption that the Spring Budget is going to be enacted sooner or later, then what do you have to be careful of?
"One of the areas to be cautious of is pension contributions!"
The old rules give a bigger allowance than the proposed, but not yet enacted, rules for people who have already started to draw income from their pension, but still pay into a money purchase pension. So how much should you pay into your pension? Prudence suggests that you don't pay too much in, just in case the lower limits apply and it costs you more!
But what if the limits are applied in a time apportioned way and you find out after the post-election budget that you could have paid more in? Let's hope that any changes are brought in sensitively.
"What about taxation of non-domiciled individuals?"
There aren't many non-doms in the UK by comparison with the total population, but the rules affecting the taxation of non-domiciled individuals were going to change. That change was dropped from the slimmed down Finance Act, but will it be postponed or backdated when the post-election rules are made?
The best advice is to continue as if the budget changes are in force, don't mix your money, but ensure that capital and income are banked separately to avoid 'tainting'.
"How does the Finance Act 2017 affect the business world?"
For businesses that own other businesses, one of the highlights of the 2017 Spring Budget was changes to the substantial shareholding exemption. This exemption has been around since 2002, and the proposals would have meant that more companies would qualify and help to make the UK a more advantageous place to have a holding company.
This is a very helpful change when thinking of the UK in comparison with other countries to locate your business. Again, prudence dictates that you plan for the changes to be implemented, but don't rely on them to apply to any transactions until we get the second Finance Act.
Changes to the taxation of termination payments for departing employees are similarly dropped, and we need to wait and see if they are brought back later.
Similarly, the proposals on 'making tax digital' (or should that read; making tax difficult) have also been dropped. However, before all those business owners and landlords out there think this is a reprieve, think again. The government is committed to the making tax digital process, and it is unlikely that this will actually represent a delay. The implementation date of April 2018 is likely to stand.
And finally, what of the gig economy and workers' rights? This might be a case of living in exciting times! The Spring Budget happened back in March and since then, the Works and Pensions Committee of MPs has issued a May Day report saying that the rules need to be changed.
By the time that the election is over, we are likely to have the results of the Taylor Report, commissioned by the Conservatives, into this issue. This review of modern working practices is likely to recommend that self-employed gig economy workers should be granted greater protections and benefits.
If this is the case expect it to be included in some legislation over the next few months as well. Also, expect some tweaking of the rules on national insurance for self-employed people. It is likely to become more expensive as a result.
"The taxman keeps telling us that tax doesn't have to be taxing!"
But then they keep changes the rules and making it more complicated again! If you need help cutting through the mire of tax legislation and understanding how the Finance Act 2017 affects you, give me a call on 0333 335 0422 or click here to send me an email enquiry and let's see how I can help you.
Until next time ...
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.